Southwest Airlines

“To attract new and retain loyal customers, we launched a new and innovative boarding system, coupled with a business select product offering an improved Customer Airport Experience. We also strengthened our brand by refusing to “nickel and dime” our customers as our competitors have done. (1)

—Gary Kelly, CEO, Southwest Airlines

FIGURE 1: TOTAL COST OF A TICKET

The Airlines: What Are They Thinking?

One has to wonder what airline executives were thinking when they began eliminating in-flight service, charging for baggage, adding extra fees for flight changes, charging more to sit with a family member or associate, and adding an extra charge based on a customer’s size. These policies—and the anti-consumer attitude they convey—have driven the customer experience on most of the domestic airlines into the toilet, with one exception: Southwest Airlines.

Southwest strives to understand and enhance the customer experience, while offering pricing that provides a good economic value for its customers. The net result is a higher level of customer satisfaction, a lower rate of customer complaints, and a higher market share. Figure 1 illustrates the customer value that Southwest creates for a $69 ticket without add-on fees. The identical flight on a competing airline averages $146 for the same flight, when fees are added (2).

Airline Customer Complaints and Customer Satisfaction

In 2011, Southwest had the lowest consumer complaint rate out of 16 major airlines, while United Airlines had the highest complaint rate (3). Figure 2 shows the complaint rates for the top six airlines and a combined average of the other ten airlines (All Others). Five of the top six airlines had customer complaint rates that were higher than the average rate of the remaining ten airlines.

Figure 2 also shows the 2011 customer satisfaction scores as measured and reported by the American Customer Satisfaction Index (4). Southwest had the highest customer satisfaction score (81) and the lowest complaint rate. One can readily see that customer satisfaction scores decrease when the complaint rates increase. For this small sample the correlation was -.71.

FIGURE 2: AIRLINE CUSTOMER COMPLAINTS AND CUSTOMER SATISFACTION

But how does Southwest’s customer satisfaction compare to other top performers outside the airline industry?

FIGURE 3: SOUTHWEST AIRLINES BENCHMARK PERFORMANCE

Figure 3 provides a small snapshot of Southwest’s comparative performance within the industry, as well as a benchmark of the airlines against two other industries. While Southwest does not match Apple, it outperforms the PC industry average. When compared to personal care and cleaning products, Southwest is below the industry average. Serving an airline passenger, however, is a much more challenging customer experience than toilet bowl cleaner or deodorant.

Figure 4 examines the top and bottom performers in the American Customer Satisfaction Index database and presents a stock price index for these companies over 10 years (5). In this 10-year period, a stock index of 100 for the S&P 500 grew to approximately 200. The stock index for the top performers (Apple, Clorox, Southwest, etc.) grew to roughly 300. The stock index for the bottom performers was essentially flat after 10 years.

FIGURE 4: CUSTOMER SATISFACTION AND FINANCIAL PERFORMANCE

Southwest Airlines: Understanding the Customer Experience

In Southwest’s ongoing efforts to improve the Customer Experience, they contacted more than 10,000 randomly selected customers daily via e-mail to ask them about their recent travel experience with Southwest Airlines. It’s not surprising that their response rates exceed norms. Southwest’s customers are eager to share the purpose of their trips; disclose their willingness to recommend the airline to others; and to rank their check-in, gate, in-flight, arrival, and overall experience on a scale from one to ten (6).

Based on these survey results, Southwest calculates a Net Promoter Score (NPS)—the percentage of “Promoters” (those who are likely to recommend Southwest Airlines) less the percentage of “Detractors” (those who would not recommend Southwest). A high NPS indicates a strong competitive advantage. If customers indicate overall dissatisfaction, a score of one to six, they are asked to provide additional feedback as to why their experiences were less than satisfying. In 2011, Southwest airlines exceeded their goal of an NPS of 65 for the full year.

Survey results are published internally via the Southwest Customer Experience Dashboard, enabling employees to continually evaluate and improve their contribution to the overall customer experience. They are also able to drill down to specific locations and various aspects of the customer experience to better learn and target improvements. By improving the understanding of their customers through this survey, Southwest can identify successes and areas of improvement to keep customers coming back.

Net Promoter Score and Performance

FIGURE 5: CUSTOMER PROMOTION AND SALES GROWTH

The Net Promoter Score is a simple but valuable customer performance index. As shown in Figure 5, customers rate their likeliness to recommend products to others on a scale from zero (would not recommend) to 10 (would strongly recommend). Customers are then classified as Promoters, Passives or Detractors. The NPS is the percent of Promoters minus the percent of Detractors. Figure 5 also shows the Net Promoter scores for the top six airlines and its relationship to sales growth. Again, Southwest is in a league of their own with a score that compares to many other top performers such as Apple. One can clearly see that the NPS is connected to sales growth. The more customers are satisfied with their passenger experience, the more likely they are to recommend the airline to others. This creates word-of-mouth buzz that is free to Southwest Airlines. Likewise, detractors who have a bad customer experience and have low levels of customer satisfaction are more likely to tell others about their unfavorable experiences.

Customer Performance Metrics and Market Performance

A customer-oriented business such as Southwest Airlines is sensitive to the customer experience that they create. They track customer experience with metrics such as customer satisfaction, customer complaint rate and net promoter score—but also strive to understand what drives positive and negative customer experiences.

FIGURE 6: CUSTOMER AND MARKET PERFORMANCE

Figure 6 summarizes three customer performance metrics and two important market performance metrics. This clearly illustrates the relationship between customer performance and market performance, and demonstrates how Southwest outperforms their top five competitors. As the other airlines continue alienate customers with further reduction in services; additional fees; and higher ticket prices, Southwest should be able to continue to advance its level of competitive advantage and market performance.